Increasing Demand Stokes Innovation

It is a fascinating time in the pellet industry. As I write this, I’m organizing nearly 5 hours of interviews into a story for 2014’s first issue of Pellet Mill Magazine about challenges this industry is facing as it works to perfect the financing, engineering and construction of a fleet of export scale pellet facilities. The idea struck me while listening to a panel of pellet producers speak candidly about the challenges of getting export scale pellet facilities financed, built, commissioned and operating at nameplate capacity. Call it hubris or naivety, but I was operating under the assumption that in these times, in this country (and others) that if something could be imagined it could be built, with little trouble.

Since hearing that initial discussion in late October, I’ve spoken with OEMs, fabricators, engineers, consultants and plant developers. The conversations have all started at the same place, “there are nearly 200 operating pellet facilities in North America and the technology required to produce a pellet is well understood. Where then, is the challenge in bringing these larger facilities online?”

The theme that emerges, at least based on my interviews, is that despite outward appearances each developing pellet facility is unique from the others and as a result will follow a new path to financing, construction and ultimately, operation. If two plants share a common feedstock species (let’s say southern yellow pine), then the two plants have vastly different financing schemes. Or, if plants have similar financing schemes, one plant may have a source for wood chips while another may have to build its own chipping infrastructure. At least in the conversations I’ve had while researching this article, a “standard” export pellet production facility has yet to emerge.

This is where this industry gets really exciting. Why? Because all of the nuance, and the one-offs, and the “we haven’t seen this before” are drawing out incredible talent up and down the forest product, engineering, construction, storage and transportation industries and one by one these challenges are being met and overcome.

By the count here at Pellet Mill Magazine, there are nearly 5,000,000 metric tons of pellet capacity under active construction in North America right now. On top of that, we’re tracking nearly 7,000,000 tons of capacity under various stages of development.

The market signal from foreign pellet buyers remains strong. The industry has shown export growth in seven consecutive quarters and this continued demand continues to stoke innovation as the industry races to bring more capacity online.